Podcast Episode 113 Transcript

Episode 113: Best Of David Pere From Military To Millionaire

Are you ready to bring your real estate game to the next level? My name is James Prendamano. I'm the CEO and founder of Prereal. And over the past 25 years, I've closed over a billion dollars in transactional real estate. Each week, I'm meeting with outstanding and investors, highperforming individuals and visionaries operating in the real estate space. These are the people that are actually out there in the real estate game right now getting it done. This podcast aims at bringing anyone's game to the next level. This is the prereal podcast. Welcome, everybody, to the show. We're joined today by David Pere. We have a real treat. David has a remarkable story. He's the CEO from military to millionaire. He's the co founder of the real estate War Room Mastermind. He is clearly a heck of a resourceful guy. He's got an amazing story and I think some real value will be able to deliver to the audience today. David, thank you so much for joining us. Yeah, thanks for having me on, brother. I appreciate it. Absolutely. Where do you see the market heading? I'm curious to speak to investors from around the country and get an idea of if they're seeing what I'm seeing and where you think the ship is headed. So with that, David, what do you see in the next one to three years? Yes. Here's where I pull out my crystal ball and if I'm wrong, we all forget this ever got said. And if I'm right, three years from now, I'm going to be on an infomercial saying, the guy who predicted correctly. Such a double edged sword. Right? Because there's two main things going through my head. One is, oh, my goodness, this is so hot. And everybody's decided real estate is the answer. So fundamentally, now that the entire world knows about real estate, it's got to be at the peak, we've got to be at the top end of the market. It's too crazy. People know everything. Like, everybody everywhere is talking about real estate. It's going to come down. It's got to happen. Right. There's definitely that emotional side of the market. But then when I look at things analytically, it's like, well, inflation is historically pretty good for real estate values, right? They seem to hold. OK. Inventory is ridiculously low everywhere, especially here. Like, I'm listing a house on the market gone in two days in a market where normal. So we listed a two one. Not like your ideal big family home, right? Like, just a little rental, two bedroom, one bath that could be a good starter home or a rental property. And we listed this thing at full market value and had almost full price cash, no contingency offer within three days going on the market in a market where normal, like JSON market is like 45 to 80. Right. This is not historically a super crazy buyer's market or seller's market. So it's like, I can't really argue with that. It's very hard to say, well, the market is doomed when the inventory that's the problem here is you can't find enough houses and that's supply and demand. That's the biggest driver of any economic cycle. Right? So that's kind of my camp right now is like, okay, well, interest rates need to go back up. If interest rates don't go back up, I think the economy is eventually going to just then that's going to be a reason that we see a crash here because the Fed doesn't have any other levers to pull other than printing more money, which is bad. But as far as boots on the ground, I feel like my market is extremely healthy right now. As far as market sentiment, I feel the same way. It's just the overlooking emotional side of me that's like everybody else is thinking the same thing I am. So it's probably time to start. So basically what I'm doing right, to answer what people actually care about is I'm selling the underperforming assets and that's kind of my hedge, right? So I'm selling the ten unit that makes good money, does okay, but is a headache. And I'm selling the single family that barely cash flows and I have some equity in it, but I'm keeping all the things that cash flow well that aren't a headache, that are decent properties of decent locations. And I'm buying everything I can with long term fixed rate debt as long as I'm getting it for 60 $0.70 on the dollar off market for current value. So I'm still paying, I'm paying today what I would have been paying three, four years ago on the MLS. So I know, okay, even if we do see a correction, it's not going to be that, it's not going to hit me that hard. And I'm making sure it cash flow as well. And as long as I can get those two things, I don't know what the future holds, but I'm going to keep buying stuff as long as I can get a good discount.

So if the market there has got tremendous absorption rates and there's always supply and demand of the standard kind of key metrics for any market and submit, where are you finding deals that are 60% to 70% discount to market?

This is where I should hold up a letter, but they're all with my system right now getting run through the system. Two main forms, right? One is direct mail, right? So I use ballpoint marketing is kind of my go to as far as direct mail. They do the handwritten machine written, but they look handwritten letters. Had a lot of success with that. And then on the other side, we just started yesterday with two cold callers that we hired. One is in Egypt and one is in Albania and they're both affordable and holy smoke. So far today, apparently one of them has gotten six leads, which if I can get six leads at $5 an hour. Okay, let's go. Right. That would be the cheapest marketing source I've ever had. So, I don't know, we'll try to get my hopes up about how good that could be. And we're just going to town with pulling lists of people who have pain points. Right. They have a lien on their property or the city said you have a code violation or whatever.

Yeah. So the power ISAs and the VA's and all this kind of next iteration of real estate outsourcing, we have had tremendous success with them. So I think that what you're finding with your Isas or your cold callers, you're going to find is the norm and you're going to end up with the situation that you're going to have to solve for, is how do you manage all of these great leads? Right. We've had tremendous success with it. And it's crazy how in any market, regardless of the metrics, there are always deals to be had if you just know where to look. It's something that people, I think, lose sight of so quickly, they feel the market is hot already. I missed the boat on this one. No, man, there's deals out there, there's gold. You just got to know where to look. Absolutely.

Yeah, I agree. And that's exactly what it comes down to is it's the mentality and it's just knowing what to play with. Right. So direct mail has worked very well for us, but I also know that in this market, not a whole lot of people are doing texting or cold calling. So I'm going to kind of pivot into that as well just because when I start hearing, oh, I keep getting these letters and I think, all right, well, let me try something else and see what happens.

Yeah, absolutely. So the market remains strong down by you. I'm curious, who's buying all of the housing stock? Are you guys seeing a big influx from Center City and from the big cities, people pushing out? Who's the base by you? Well, a lot of my buyers are still investors. I don't think we've seen a huge uptick from bigger cities so much as our base seems to be the blue collar who couldn't get approved for a mortgage and now that interest rates are lower and they've gotten some stimulus or whatever. If they were smart, they can afford a down payment and they can afford to get into housing right now with the way the rates are.

I guess what I should say is that we aren't far enough into it to see that there's a trend as far as new buyers, but there's definitely been some growth from out of city, out of state. It's not big enough that you can just be like, oh yeah, there are people coming from New York. We've had an influx of jobs here and so they're coming from places, but it's not like any one spot. We're not like Austin where the entire world is moving to austin from san diego, la. And whatever silicon valley influx of jobs, any specific segment? Just kind of weird stuff, right? So we got an amazon warehouse. We got a costco, we've got some springfield has a decent amount of manufacturing, so we've got a three implant and a budweiser has a plant here. And bass pro is headquartered here. O'Reilly is headquartered here, but it's mainly more the manufacturing side and like the warehouse side that will do it. Man as the big cities decentralize and they no longer remain the epicenter for jobs. And a big reason for that is the decentralization of everything, including the warehousing and the manufacturing. We were screaming about this a couple of years ago. Get out of the overly regulated multifamily up by us at least because legislative threats are top of every analysis. Now legislative threats are just brutal for us and shift to MZone because we feel that there still is a humongous amount of upside left in that market. Are you guys seeing any regulatory threats by you? No, not really. I mean, the one thing on the airbnb side, they're not strict. They have some rules that don't really make sense here. And they're not driven by hotels like they are in a lot of big economies, so much as driven by like as far as I can tell, some old neighbor was complaining to city hall loud enough that they were like, these are annoying. Let's just kind of limit them. That's probably about it. Springfield is fairly easy to deal with. The little town where our hotel is, we're actually waiting to hear back on an offer. If we get an offer approved, we're going to buy another 27 unit apartment in that town that actually shares a fence line with the one we currently own. If we buy that, we're going to own 106 doors in a town that has 3200 people. So like 3% of the population will be our rentals. Oh, yeah. So it's interesting. And so in that market, it's like as far as regulatory, it's like, well, we have the police chief's number, the mayor's number, and the city development number. So it's kind of more of a like people call us and say, hey, it's weird. It's totally different, dynamic. But in springfield, they're still pretty easy going. I mean, obviously there are rules, but they're few and far between. Right. We're an interesting state as far as constitutional carry and pretty easy going on a lot of life, which is nice. Yeah. I think another overlooked part of the transition here, the decentralization, which again, we've been screaming about for a decade. We saw the first wave of the decentralization. We saw the corona virus hit. People broke their habits. 60 some odd days to replace a habit, another 60 some odd days to put a new habit in. And people said, hey, we could do this. Right. We're going to trade in our nine to five and opt for a different life. That was people proactively that for the most part, those were people that were a little bit more financially set, that had the flexibility to make those decisions and take a little bit of that risk. I think what you're going to see next is the companies that have had enough and have kind of wised up and have gotten to a point where the regulatory madness and the litigious society that we're in up here, you're going to find these big corporations start to push back from the table the numbers right now, believe it or not. And so few people look at this side of it because it's scary. 8% of workers, office workers are back in five days a week in Manhattan. 8%, right. Yeah. Now, when the big companies are responding to some surveys and we're reading these surveys and they're saying things like, we haven't quite decided on when or what the future looks like, and we'll revisit things in Q two of next year that's companies speak for we're not coming back. Right. And they're going to start to look for those elements that can be contested, like force major in their lease, and they're going to start breaking leases out, and they're going to shrink and they're going to relocate, and they're going to be then pulling the workers with them. Right. So the first set was people could do it leaving. I believe this next run is going to be the companies that are now saying, you know what, let's trade in that Fifth Avenue office. 300,000. We pay a million dollars a year fine because we're not Green compliant, and we pay $5 million a year in taxes on let's go replace that with five offices that are 20,000 sqft. Let's get lean and mean in five of the emerging markets across the country and decentralize at a fraction of what the cost base is today. So I think that those smaller towns and these secondary markets and even the tertiary markets, there is still a lot of upside because I think that, again, simple supply and demand that we talked about earlier, you're going to see those metrics start to flip and more and more and more people are going to start locating to these secondary market. Oh, yeah. And then if they can figure out, they crack the code on the remote working thing, right. And they figure out like, oh, I have a buddy, him and his wife are both high end accountant CPAs for a company. And they were making and I'm going to make all these numbers up because I don't remember let's say they were making $120,000 a year in San Diego. So they're bringing in 240 a year together. They relocated to Florida about a year ago, and their company was like, yeah, hey, we're totally cool with you guys. We're located in Florida. But you're going to take a $15,000 a year pay cut right, because whatever and cost of living. So the company saves $15,000 a year or 30 because they were paying both of them for them to move. But in Florida, where they moved to, that 105 goes a lot farther than the 120 did, and so they're still better off. So it's like if a company can figure out that piece right, the Geo Arbitrage piece, now you got people who are working remote as they have been for the last two years. I feel like it's just corporate trying to figure out like, a, how do we tell them you're not going to make as much money, but it's going to be a lot better for you, and B, because it will, as long as they move somewhere. That makes sense. And B, it's almost like the Marine Corps side of things where it's like, we've let them work from home for so long, but we can't just but what if we have to call them back into the office? We don't want to let them go everywhere just yet. And it's like they just need to get past that fear. And once they cut that cord and let 80% of these people work remote and be successful and they can realize, like, man, we can cut our expenses so much. Yes, I think you're absolutely right. Why would they be stupid to work from a $300,000 or 300 square foot, thousand square foot place if they can work from ten or 20,000 square foot place and have people all over the country and pay less for it? Yeah, significantly less on the cost of real estate side. But then again, the regulatory it's tough up here, man. It's tough to keep things moving anymore. There's just so many challenges. Much of the legislation, much of the changes are well intended, but we've long since passed that point where it's just become too heavy, it's just become untenable. And you're going to continue to see this mass exodus, I believe, until things stabilize and they start shifting, because I don't think it's that big of a sell. David to Joe or Susie, hey, we're going to knock your pay down by 20%, but you get to go live in Jacksonville, and the cost of living is significantly better there, and we're going to pay for you to move, and you only have to be in the office twice a week. I think the population is ready for that. Yeah, I agree. Especially the younger population who wants to travel anyway, right? Yeah, without a doubt. So do you have any straight commercial in your portfolio? Like retail? I had a little bit of retail for a little while. We did it as a lease option, and we ended up ultimately not going through with it. But that was less because of it being the asset that it was and more just because of some things that had not been performed accurately. So we got into it and realized this isn't exactly what we thought we were getting into. I wouldn't be opposed. There's a couple of buildings in downtown in my market that I've been trying to buy for a long time. And sellers are not always as easy to work with as you'd like. So then, going back and forth, there's one gentleman, I've probably been to his office six or seven times, and we just haven't found a price point that works for both of us. But I would love to buy his building. So trying to buy some more. And that's like a commercial retail front with an upstairs loft. So I would basically use the loft as my office and then rent the bottom out. In this case, hopefully like an ice cream parlor that's coming in great. Well, listen, I really appreciate you taking the time today, Dave. What's the best way for people to find you? Just Google military millionaire. We're finally getting to a point where you'll be able to find all my platforms there. It's Instagram, Facebook, YouTube, TikTok, I mean, you name it, we're out there. I really appreciate it. David Pere, everybody. David, thank you so much for the time. Everybody out there is always stay safe.